Merkel has upper hand in meeting with Obama

United States President Barack Obama is likely to press German Chancellor Angela Merkel to support a growth package to bail out Europe at the G8 summit this weekend amid fears in the White House that the eurozone crisis could damage Obama’s re-election chances.

He was scheduled to meet Merkel, new French President François Hollande, Italian Prime Minister Mario Monti and British Prime Minister David Cameron at Camp David on May 18.

But foreign affairs analysts said Obama’s leverage on the issue was minimal. Although the US had the economic muscle to help Europe out of its mess, the Obama administration took the strategic decision not to become involved directly.

Instead, Obama will use the summit for some quiet diplomacy, hoping to sway Merkel to endorse some immediate action to help growth.
Obama’s problem is that most of the initiatives being discussed in Europe are medium-term or longer, too late to help him if the European crisis has an impact on the US economy before the election in November.

The president, in a television interview on Tuesday, acknowledged that the crisis could hurt the US.

Weak“Europe is still weak and that is creating uncertainty for the business community here,” he said.

White House spokesperson Jay Carney also recognised the potential pitfall. At the daily White House briefing, Carney described the eurozone crisis as “one of the headwinds that we face” and said the government was monitoring it closely.

The replacement of former French president Nicolas Sarkozy by Hollande, who fought the election on a pro-growth platform, provides Obama with a potential ally in his quest, possibly forlorn, for an immediate European stimulus programme.

Obama will welcome Hollande to the White House on May 18 before they go on to Camp David and then to Chicago for a Nato summit.

At a Centre for Strategic Inter­national Studies press conference in Washington on May 15, Matthew Goodman, who until last year worked for the Obama administration as the person responsible for the G8 and other international forums, said the US was consciously trying to put the onus on the Europeans to solve their own problem.

Value of the G8He said Obama’s leverage was relatively limited “but the anxiety will be real. And that will come out, I’m sure, in what President Obama says to the European leaders.”

Goodman said that when he was in the administration, there had been debate about the value of the G8. But the Arab Spring had revived interest. “And this year I think the eurozone problem has given it particular focus again.”

Heather Conley, a former state department official responsible for European affairs, agreed with a reporter who asked whether Obama might ask Merkel to switch from pro-austerity policies to pro-growth.

“Yes, I think certainly the president would encourage Chancellor Merkel to, in fact, create that balance. And the administration – secretary [Tim] Geithner and others – have been encouraging not just an austerity-only approach to the debt crisis. I think the chancellor will respond positively to that,” Conley said.

“But, as I said before ... the devil is all in the details on this. Everyone agrees that economic growth is a good thing. We all agree that world peace is a good thing. How do we accomplish it? Again, most immediately for Europe, how can this be accomplished right now to break this vicious cycle, in my view, of where austerity is now crushing growth?”

Sitting on the bleachersConley added that the president’s role was limited. “We’re not in this game, quite frankly. This is really for Europe to sort out and that has certainly been the administration’s approach in policy to that. We are sitting on the bleachers a bit. And we are going to have to watch how this plays out with the frustration in recognising that it will have a profound impact for the global economy and for the US economy.”

The main concern for Obama is the economic crisis, but high on the agenda is Hollande’s election pledge to bring French troops home from Afghanistan by the end of the year.

Foreign affairs analysts predict that Hollande will not be looking for an international bust-up when he meets Obama and some fudging may be worked out that would result in a French troop withdrawal beginning before the end of the year, two years earlier than US troops, but being phased over a longer period, or French troops withdrawing from combat roles to purely training.